Lawmakers take another look at military retiree cut

John Fritze, The Baltimore Sun

Facing a backlash from veterans, lawmakers in both parties — including several in Maryland — are reconsidering a cut to military retiree pensions that they approved last month as part of a rare bipartisan budget agreement.

Several proposals have been introduced to tweak or roll back the $6 billion cut to annual cost-of-living adjustments — or COLAs — for working-age military retirees. The issue is gaining prominence as lawmakers prepare to return to Washington this week.

"We need to get our fiscal house in order, but not on the backs of our nation's heroes," he said.

The budget was hailed by President Barack Obama and others as an uncommon display of compromise in a divided Congress. But the growing controversy over the retiree provision underscores how difficult it can be for lawmakers to address rising costs as an aging U.S. population strains retirement and safety net programs.

In 2012, 2.3 million military retirees and survivors of those killed in action — including about 57,000 in Maryland — received $51.7 billion in payments, according to the Pentagon. About 904,000 of the retirees were 65 or older.

Before lawmakers made the adjustment, the cost of military pensions was expected to increase to $55 billion in 2017 and $59 billion in 2022.

The budget approved by Congress and signed by Obama would limit cost-of-living increases for retirees under 62 to 1 percentage point below inflation starting at the end of 2015. As a result, lawmakers who crafted the budget estimate that service members who join the military at 18 and retire at 38 would receive about $1.7 million over their lifetimes instead of $1.8 million.

Once a retiree turned 62, payments would increase as if the full COLA had been paid in previous years.

The military retirement system, which permits active-duty retirees who have served 20 years to collect payments regardless of age or other employment, has been targeted for cuts before. A bipartisan deficit-reduction panel Obama created in 2010 recommended deferring cost-of-living adjustments entirely until retirees turn 62.

"Military and civilian pensions are both out of line with pension benefits available to the average worker in the private sector, and in some cases, out of line with each other across different categories of federal employment," the group wrote.

Congress did not act on the recommendation then.

Many service members who retire in their 30s and 40s begin second careers outside the military, some as civilian contractors to the Defense Department.

Veterans and their advocates say the COLA change represents a betrayal.

"We're talking about hundreds of thousands of dollars," said Ted Daywalt, president of a Georgia-based employment website for veterans known as VetJobs. "What was promised to them is not being delivered."

A separate provision in the budget that requires civilian federal employees to contribute more to retirement affects only new hires, keeping the status quo in place for people already in the system.

The House and Senate approved the budget agreement last month with broad support, in contrast to party-line votes on other recent spending bills. But concern over the military retiree provision has also come from members of both parties.

On Thursday, Rep. Darrell Issa, chairman of the House Oversight Committee, became the latest Republican to propose that the pension cut be repealed. To offset the lost savings, the California lawmaker suggested limiting Saturday mail delivery by the U.S. Postal Service.

Some Democrats, including Sen. Barbara A. Mikulski of Maryland, have proposed replacing the COLA reductions with other savings, such as from closing corporate tax loopholes or ending certain farm subsidies.

The agreement was "a compromise that included policy changes I would never support on their own," said Mikulski, chairwoman of the Senate Appropriations Committee. "I am so disappointed it included a plan to reduce COLA increases for working-age military retirees."

Rep. John Sarbanes, a Baltimore County Democrat whose district includes the Naval Academy, said, "It's unfair to condition every budget deal on cuts that hurt public servants and military retirees while leaving in place billions of dollars in corporate subsidies and special-interest tax loopholes."

It is unclear whether leaders in either party want to revisit the issue and tinker with the budget. Many of the proposals to offset the cost of eliminating the retiree cut stand little chance of winning approval.

"All this reform does is make a small adjustment for those younger retirees," the Wisconsin lawmaker wrote.

Lawmakers are nevertheless likely to amend the provision to exempt disabled retirees and survivors of those killed in action from the cut. Ryan and his Democratic counterpart during the negotiations, Senate Budget Committee Chairwoman Patty Murray of Washington, support the idea.

Rep. Andy Harris, the only military veteran representing the state in Congress, described cuts to disabled retirees as "just wrong."

The Baltimore County Republican, like other House conservatives, voted against the budget because it increased spending over the 2103 sequestration cuts.

Rep. Chris Van Hollen, who helped craft the budget, is one of several members introducing proposals to revisit the COLA adjustment.

The Montgomery County Democrat wants quick action on a bill he has introduced to roll back the cut for medically retired veterans and their survivors. They represent about 10 percent of those affected.

Van Hollen predicted that other legislation would address the cut for the rest of those affected.

The outcome of the debate over military pensions, he said, could hinge in part on a special commission Congress created in 2012 to review military compensation. That panel's recommendations are due in May.

Van Hollen, the ranking Democrat on the House Budget Committee, said many in his party opposed the cut to retirees as the agreement was being negotiated.

"We were very clear that we didn't think that was the best way to go," he said. "I think people will look for a resolution to this."